For weeks now, we’ve all heard about the ongoing threats between the Obama Administration and the Republicans. We were glad to see those pesky two words, “fiscal cliff” fall to the wayside after the first of the year but the last thing we expected was another catchy financial term that serves as a new threat. And rest assured – this is indeed a new and powerful threat to every American consumer’s wallet. Here’s how it could affect you.
First up, you need to remember that there’s not a single government agency that hasn’t announced its plans to implement changes – from agencies that handle social services to defense agencies to those who deal with banks. It’s going to cut deep across the board. If you’re wondering if one agency will be affected, your best bet is to assume it will. Sequestration cuts are estimated to total $85 billion in budget reductions.
As many know, covering the credit card payments is the least of their worries these days. With childhood poverty rising at a disturbing pace, the realization that 600,000 low income children and women will no longer have the Special Nutrition Program for Women, Infants and Children (WIC) to turn to. That program disappears on Friday if these problems are handled on a political level.
The latest numbers from 2011 (the latest available statistics) tell the tale:
- 46.2 million people were in poverty in the U.S. (15%)
- 9.5 million families were living in poverty.
- 16.1 million children under the age of 18 were in poverty. (22%)
- 3.6 million seniors 65 and older were in poverty. (16%)
All of those stories we’ve read in recent months about ongoing money scams, identity theft, money laundering and embezzlement? They’re out too. That means efforts to send money to terrorists and drug cartels will basically hit no legal roadblocks at all. The Federal Treasury will have to cut those investigations. Remember, too, that there are several high profile cases already in the headlines – and they account for millions of stolen cash on an international level. Credit card scams are on the rise, the recent denial of service attacks on the nation’s biggest banks and new money laundering schemes being revealed on a daily basis are just a few of the examples of why this is not good for the financial sector. If the political leaders in this country are unable to find a solution, this is just the beginning of what happens first. Worse – no one is really explaining any long term repercussions, either on the national or global level or for individual families.
And speaking of terrorists, 47,000 fewer FAA employees will be keeping our airports safe. Air traffic will be significantly reduced, delays will be outrageously increased and the busy summer travel season? You might as well nix those plans now if no solution is found this week. Your mileage rewards? Hold on to them because it could be they will serve no purpose during a sequester. The Department of Transportation also says TSA staff reductions will lead to further headaches in the nation’s airports.
No Help for Homeless
According to the Department of Housing and Urban Development (HUD), more than 125,000 consumers will find themselves with no assistance from the Housing Choice Voucher. The odds of their losing their homes are great and the risk for homelessness increases dramatically. Emergency shelters and other government housing programs will simply cease to exist, according to HUD.
Almost 4 million unemployed will no longer see their benefits and if they do, they will see “drastic cuts” in the amounts they receive each week, according to the Department of Labor.
Need to file a complaint about a bank or credit card company that’s operating illegally? You won’t be able to turn to the Consumer Financial Protection Bureau as its funding dries up right away too.
A New Storm
Other cuts will be found in NOAA, which says the risks will be “significantly increased” when it comes to forecasting the weather and the “ability to warn Americans about tornadoes and hurricanes”. Remember, hurricane season begins in 90 days. The Department of State says it will have to reduce by 200,000 acres the area it treats for hazardous fuel contamination. As we know, this increases the wildfire risk. $300 million is cut from foreign military financing, which means military assistance to some countries will be reduced – countries we rely on for oil, too, mind you.
American payrolls drop by $400 million, shutdowns of meat and poultry plants are possible, a cut of 4 million home delivered meals to seniors will occur and 70,000 children will lose their Head Start places. The FBI will no longer be able to conduct background checks for gun purchases. There will be staff cuts and furloughs in the Bureau of Prisons, which means the safety of staff and more than 200,000 prison inmates around the nation can no longer be guaranteed. Partial prison lockdowns will occur.
If you’re thinking this can’t possible affect your finances, you might be surprised at just how much it can and will affect your wallet.
If employees are unable to get babysitters because there aren’t enough employees at the Head Start locations, employers may see it as an opportunity to cut hours for all employees. At this point, they may believe they don’t have much to lose. After all, the government has shut down. While we never think that it’s the Treasury responsible for moving money and instead figure the banks just snap their fingers and they’re moving along, remember that it all comes from the same place. And what happens if your identity is stolen and your credit cards are maxed out? If you have no one to call, you have no way to halt the damage. There are countless ways these sequesters, if they happen, will affect every decision you make.
The worst part is no one really knows how to plan ahead. Should you pull cash out of the bank? Most consumers are, but exercise common sense. The ATMs won’t suddenly just stop working. You don’t want to begin withdrawing all of your assets. Pay attention to the latest goings on and educate yourself. It’s going to be a learning curve for everyone, regardless of what happens on Friday.